Structured digital reporting
The Financial Reporting Council (FRC) has published its latest review of structured digital reporting by UK-listed companies, identifying areas where relatively simple improvements would significantly enhance the quality, consistency and usability of the reporting.
It also highlights recurring issues that continue to limit the usefulness of structured data for investors, regulators and other users.
Disciplinary cases
The FRC’s reports on cases against accountants and auditors provide more generally applicable insight into the traps that auditors in particular can sometimes unknowingly fall into. They include the following:
- the auditors not realising the client was a public interest entity (PIE), and so failing to implement all the additional requirements for PIE audits including the prohibition on the provision of certain non-audit services
- the auditors not understanding the client’s internet streaming business and risk, as required by ISA 315, which led to the audit being largely ineffective
- the auditors failing to understand the operations of a private bank that was part of a large group of unconsolidated entities under common ownership, resulting in a fine of £2.8m for the firm
- the audit firm exceeding the maximum 10-year engagement period for PIE audits without renewal via a qualifying public tender
- the audit firm creating ‘false audit evidence', causing auditor’s reports to be issued without approval from the relevant audit engagement partner, and inserting electronic copies of the audit engagement partners’ signatures in auditor’s reports without their approval’.
Accounting standards
The International Accounting Standards Board (IASB) has issued a new accounting standard, IFRS 20, Regulatory Assets and Regulatory Liabilities. This will help investors to better understand how payment rate regulations (such as water, gas and electricity price controls) affect financial performance, financial position and future cashflows. This standard will ensure companies, such as utilities, account for differences between when supplying and charging for regulated goods and services, as reported revenue may not fully reflect a company’s performance as a result. See also ‘Utilities companies prepare for IFRS 20’.
The IASB has proposed changes to the IFRS for SMEs Accounting Standard that would include exempting parent companies from filing consolidated financial statements if the parent is itself a subsidiary, and its ultimate parent (or any intermediate parent) already produces consolidated general-purpose financials or full IFRS Accounting Standards-based reports.
The IFRS Foundation will appoint IASB vice chair Linda Mezon-Hutter as acting chair, replacing Andreas Barckow when his term ends on 30 June, until a permanent replacement is appointed by October 2026.
Financial regulation
The International Organisation of Securities Commissions (IOSCO) has issued advice on the creation of regulatory requirements for investment information disclosures about ongoing secondary-market sales of previously listed stock. IOSCO’s advice includes disclosure principles, including materiality, timing, frequency and access to information; content of disclosure, covering both periodic reporting and event-driven disclosures; and governance and internal controls delivering accurate, timely and reliable reporting.
Brazil’s Securities and Exchange Commission (Comissão de Valores Mobiliários) has ruled that sustainability reports, which in Brazil must reflect International Sustainability Standards Board (ISSB) rules, are no longer mandatory for listed companies. While these standards must be followed for any continued sustainability reporting in Brazil, filings will henceforth be voluntary. Companies choosing not to release sustainability reports must publicly explain these decisions.
Sustainability
The Taskforce on Nature-related Financial Disclosures, along with Accounting for Sustainability, has released a guide to help CFOs assess how nature-related dependencies, impacts, risks and opportunities could affect their businesses’ financial performance and future prospects. It advises CFOs how to ensure that nature-related issues are integrated into risk management, capital allocation, valuation, performance management, financial planning and strategic decision-making.
A joint statement has been released by the Global Reporting Initiative (GRI) and the ISSB’s IFRS Foundation, designed to help reporters understand how the two bodies are trying to integrate their sustainability reporting systems. ‘Facilitating efficient reporting when using the GRI and ISSB Standards’ describes the common disclosures that the organisations have been trying to align, explaining how GRI/ISSB-compliant filings can be complementary, while meeting distinct purposes.
The GRI has released a statement calling on the EU to take care as it rationalises and simplifies the European Sustainability Reporting Standards (ESRS). The GRI backs alignment with international standards, helping companies to avoid the duplication of reporting work. It opposes a planned exemption from EU sustainability reporting for assets under management and contests restrictions on how larger companies can require sustainability data from value chain partners.
Ethics
The International Ethics Standards Board for Accountants (IESBA) is to develop a targeted, principles-based update on accounting and audit firm culture and governance to its International Code of Ethics for Professional Accountants. The guidance will avoid prescriptive provisions, following the board’s current approach. It will complement the International Auditing and Assurance Standards Board’s International Standard on Quality Management 1 (ISQM 1) by reinforcing firms’ objectives to demonstrate commitment to quality through cultures that recognise and reinforce professional ethics, values and attitudes. See also ‘Putting audit quality first’.
Public sector
The International Organization of Supreme Audit Institutions (INTOSAI) Development Initiative and the OECD have called for a comprehensive and system-wide approach to guarantee supreme audit institution (SAI) independence. It includes practical guidance and global principles to boost engagement between finance ministries, parliaments and oversight institutions. The aim is to bolster SAI autonomy, which INTOSAI and the OECD have warned is increasingly being challenged.
